By Richard Solly, Co-ordinator, London Mining Network
This year’s Vedanta AGM was preceded, as usual, by a vibrant and noisy demonstration organised by our friends at Foil Vedanta – one of a series of demonstrations against the company organised also in India and Zambia.
The company made the task of organising the protest easier this year by arranging a venue – Ironmongers’ Hall – which enabled us all to gather in a circle and greet arriving shareholders in an appropriate – if perhaps not altogether affectionate – manner. Figures wearing face masks of Vedanta Chairman Anil Agarwal and Vedanta Chief Executive Officer Tom Albanese conducted periodic wrestling matches to portray perceived tensions within the company’s board.
Inside the AGM, Anil Agarwal performed to his usual standard, going off on tangents, answering questions that nobody had asked and often failing to answer the question that had been asked. Perhaps he is slipping a little – he did not harp on, as in the past, about how India is the world’s largest democracy – but he did mention repeatedly that there are 1.2 billion people in India, whether or not this piece of information was relevant to the matter at hand.
However accurate his grasp of Indian population figures, Anil Agarwal’s grasp of other aspects of reality – including the negative impacts of the company’s operations and its economic prospects – gave the impression that he is living on some other planet. Mars is just a guess – it might just as well be Pluto, though the travel time to the AGM would, of course, be greater.
Tom Albanese looked much more than a year older than he had at last August’s AGM. The strain of working for Vedanta is showing. Given the man’s demonstrable concern for worker safety and obvious attempts to improve Vedanta’s appalling record, one may almost feel tempted to feel sympathy for him.
Company Chairman Anil Agarwal began the meeting by introducing Ekaterina Zotova, sitting at his right hand, as a new director – the latest person to be persuaded to destroy whatever reputation she might have had by association with this company.
Anil Agarwal used his address to sing the praises of the company. He said that the company will be able to take advantage of the five billion people, a third of them Indians, who will apparently join the world’s ‘middle class’ in the next few years. (He did not speculate about how long the planet can continue to support the consumerist lifestyle of the world’s middle class before ecosystem collapse, rising sea levels, water shortages and extreme weather events lead to the apocalyptic end of civilisation as we know it, but perhaps this is not a consideration for anyone fixated on short-term financial profit.) India, he said, needs many more mineral resource companies like Vedanta to supply its growing economy.
Agarwal said that Vedanta is very supportive of Indian Prime Minister Modi and his government. The company is one of the largest employers in the country. It contributed 4.6 billion to the countries in which it works – he did not say 4.6 billion what, but we can perhaps assume he meant dollars rather than, for instance, cabbages, worker deaths or environmental disasters. He predicted that the company would be strengthened by a merger with Cairn India. This will create significant value for both sets of shareholders. Vedanta is, apparently, bringing economic empowerment and social mobility to four million people. It is well positioned for the next stage of growth. Health, safety and the wellbeing of its 82,000 staff (down from 88,000 last year, according to the figure announced at last year’s AGM) is very important to Vedanta, and the company aims for zero harm. There have been fewer fatalities this year but the company will not be satisfied until zero harm has been achieved. Agarwal thanked shareholders and governments for their support.
Company CEO Tom Albanese then spoke. Albanese began by saying that it was a pleasure to be with us. (Different people derive pleasure in different ways, but subjecting oneself to unfriendly scrutiny, sharp criticism and angry derision seems to me an odd path to pleasure, and I wonder whether there was, perhaps, an element of polite dishonesty in his announcement.) He said that the right teams and assets are in place to achieve well-being for shareholders. Achievements on safety in the past year have been encouraging. But the numbers of injuries and fatalities are still too high. He said that he had been in the mining industry for 35 years, and the industry’s attitude to safety has changed a lot in that time. “Accidents don’t just happen,” he said: “we have the capacity to ensure that safety is at the top of our colleagues’ minds at work every day.”
A year ago, Tom Albanese had been struck by the potential of the company. Progress had been made on priorities over the past year, including simplification and commitment to sustainable development. Sesa Sterlite had been renamed Vedanta Ltd, in response to the workers and shareholders who requested it. The merger with Cairn India Ltd should take place in 2016. There will be benefits from being part of a large group. There is increased financial flexibility to allocate capital and sustain strong developments. Vedanta has continued to create value despite the volatility of the mining and energy industry. Its long life, low cost assets have benefited from investment and now from production increases. It is well positioned to increase growth. The largest zinc mines in the world are at Zinc India – and there has been record production of zinc and lead. Copper India has achieved its highest ever production. There are power issues in Zambia but progress is being made at KCM. Iron ore production has been recommenced at Karnataka and he expected it to begin again in Goa at the end of the current rainy season. He explained the process of safety training in Zambia, which has apparently led to great improvements.
He said that the company is committed to respecting Free, Prior Informed Consent (FPIC) in India. This came as a great surprise to me, as I had formed the impression, perhaps wrongly, that it is doing everything in its power to undermine and circumvent the overwhelming verdict of Indigenous Dongria Kondh communities in the Niyamgiri Hills, who have repeatedly and categorically rejected the company’s plans for mining in the area.
The company, he said, has also set sustainability targets. It creates jobs and supports community projects. It continues to work on human rights, to close any gaps between its performance and UN standards. “It is imperative that we continue doing this in all the communities where we work,” he said. Vedanta will continuously improve its environmental performance, its efficiency and its costs. When the commodity cycle turns, as it one day will, Vedanta will be well placed to take advantage of it.
The first questioner from the floor said that any company has the prime objective of maximising profit. He asked what was the company’s plan. “You did not mention anything about this,” he said. “This should be your prime focus. You have a high debt ratio. Is there any possibility of the company going under administration in the near future? Directors have large shareholdings. Is there any plan to privatise the company in the near future?” (I took the reference to privatisation to refer to the kind of delisting which that other glowing example of corporate probity, ENRC, effected a couple of years ago. Under scrutiny from the UK Government, it decided to cease functioning as a publicly listed company under UK law, and became instead the private property of its controlling shareholders. Anil Agarwal’s family has a controlling shareholding in Vedanta, so there are parallels.)
Anil Agarwal replied that there is no plan to privatise the company. He is fully committed to the company. Regarding profitability, he noted that the oil price is down almost 50%, the iron ore price down 50 to 60%. There is a lack of demand. There is a slowing of prices, but being based in India is an advantage because there are 1.2 billion people and “we are looking forward to how do we make our business better? We will be best operating parameters, best in operating our assets. We are making a reasonable profit and hope in future we will do better. We have debt total of 16.5 billion. That debt is needed. We are seeing if we can pay some of debt in near future.”
Mining researcher Roger Moody was called next. Anil Agarwal said, “Here’s our friend! Nice to see you!” I suspect that this may have been another example of polite dishonesty. In any case, Roger said he could not reciprocate. Roger noted that Tom Albanese had repeated the mantra of ‘no harm’.
Addressing Tom Albanese, Roger said: “No doubt you personally believe that this is the most important objective of this company, and you have done a lot of work, but eight fatalities are eight too many. In the presentation you gave, the first case example was taken from Zambia, claiming that that particular operation has had a reduction in fatalities. But there were three or more fatalities at KCM last year, which does not square that well with your presentation. I would extend zero harm to include zero pollution, and your presentation sits uneasily with the article in The Observer yesterday about Leigh Day and Co presenting a case on behalf of 1,800 people in Zambia for medical conditions that you brought on through polluted water.
“A year ago you made promises in regards to worker safety. If I remember correctly, you said that you plan to link directors’ remuneration to best environmental and safety results. The Annual Report makes no reference to this in the section on remuneration. Please point to the reference if I have missed it.
“You also said that the company was planning to bring a safety officer in from Rio Tinto. Have you done so? Do you plan to do so? When? Last year my colleague and I raised the question of the Korba operations, presented to the board and made available on line a judicial report by a judge in Hindi translated into English in 2012, which held Vedanta directly responsible for the burden of and causes of the Korba disaster. You said you would read it. May I assume you have read it? You deflected our questions on this report by saying you were expecting four further reports from India before you could respond to our questions. Mr Kumar duly sent us those reports, but they were not reports but statements of legal actions which had been launched in the Chhattisgarh High Court. In effect they were statements of cases. Three of these had been taken by the state against the company. The other one was, it would seem, a holding action that Vedanta has been engaged in since the disaster to prevent the allegations being raised in court, and specifically the allegations raised by Judge Bakshi, effectively rendering them sub judice. As I pointed out last year, it is not sub judice in this country. The report has been in your hands in English for a year so there is no excuse for allegations in that report not to be addressed, whatever court action is being taken in another jurisdiction, namely India.”
Roger then explained that an Early Day Motion on the subject of the Korba disaster had been tabled in the UK Parliament in February of this year. EDM 779 had been submitted by JohnMcDonnell MP, who had been at last year’s Vedanta AGM, and signed by, among others, the current front runner in the contest for Labour Party leadership, Jeremy Corbyn. Roger then quoted the EDM in full:
“That this House expresses its grave concern that the London-listed mining company, Vedanta Resources, has yet to account for the circumstances in which at least 40 workers died when an under-construction chimney suddenly collapsed at its Balco operations in Chhattisgarh state, India in September 2009; deplores the fact that Vedanta took steps to suppress publication of the official Indian judicial report into the event, which ascribed primary responsibility for the disaster to Vedanta; and notes that an English version of this report was released in August 2014 and a copy presented to the board of Vedanta at its annual general meeting, but that no response has yet been given by the company to the many serious allegations contained within it.”
Tom Albanese replied, “I respect your views but I hope you respect the fact that we are working very hard to reduce fatalities. Every single senior manager is focused on this. There is an emotional response that everyone has when anyone gets hurt. Eight fatalities is unacceptable. We have over 80,000 people in our care and every one has to come to work with the same attitude, properly trained to do their jobs. For any industrial company this is one of the greatest challenges. We have brought in someone from Rio Tinto to act as safety mentor and safety coach for senior leaders. He worked for me at Rio Tinto. He has done what I said he would do. The journey towards zero harm does not happen overnight. Anyone who has been in any industrial business knows the practical realities of keeping everyone safe. At KCM we had four fatalities last year but there was a complete difference after we put the safety campaign in. Other mines in Zambia had challenges. This tells me that if management puts time into this kind of training it does make a difference, but not overnight. I will work to get zero harm.”
Tom Albanese then said that, with regard to the Leigh day case, it was important to recognise that Vedanta had received a letter about it the previous Friday and had not yet been served notice so it is difficult to answer specific allegations. He could confirm that the company had received a letter on behalf of a number of claimants. Until they received the official notice he could not comment. Vedanta would be seeking further information from Leigh day and their clients, and could respond once that had been received. Until then, any court proceedings are premature. All Vedanta subsidiaries take community well-being and environment seriously. KCM has been around for about 70 years. When Vedanta acquired an interest about 10 years ago, the mine had less than ten years of resources left, and the facilities were outdated. Vedanta had invested in underground facilities and 230 million dollars of zero discharge equipment so that water would continue to be available for agriculture and drinking. The company had invested in new pumps for desilting and slurry. It had made a remarkable difference. It had reduced total solids in discharged water by 75%. It had invested in sulphur capture equipment. It had invested over 530 million dollars in refurbishing decay tanks, resulting in zero discharge from the dam.
Roger said that, according to the Observer report, Canadian engineering company SNC Lavalin was employed to advise Vedanta, and the engineers’ report recommended 17 actions to be taken. He asked which of these had been taken. Had Tom Albanese received the report?
Tom Albanese replied that when the company had been served notice of the legal case, he could answer the question.
Roger said that the question was whether the company had received the report from the engineers that it commissioned to look into the practices at KCM.
Tom Albanese repeated that when the company received notice, they would look into it. He then moved on to the questions about Korba. He said that there are four different findings which are before the Indian High Court and that Vedanta had to respect Indian judicial proceedings.
Film-maker Simon Chambers called out that Vedanta was not helping the process by repressing the findings of the Bakshi report.
Roger pointed out that Vedanta is a British company. If another British company had experienced such a disaster… But at this point, Anil Agarwal interrupted him, saying that he had visited the families of everyone killed in the chimney collapse. There was then an argument, Anil Agarwal speaking over Roger Moody and making it impossible to hear what was being said. At last, Roger was able to make himself heard again, and asked whether the company had made any response to the Early Day Motion in the UK Parliament. Had any respect been shown to the concerns of the MPs?
Anil Agarwal said, “We’ll come back to you.”
Tom Albanese said that Roger had also asked about directors’ remuneration on issues of safety. He passed this question on to Euan Macdonald, chief of the Remuneration Committee. Euan Macdonald said that the Remuneration Report notes that part (15%) of executives’ bonus potential relies on safety and sustainability, and part of the bonus is forfeited if a fatality occurs. “We consulted with major shareholders about what these measures should be,” he said. “The calculation of the bonus takes into account fatalities in different areas.” Roger asked whether shareholders could see this. “No,” replied Euan Macdonald, “because the exact proportion will change each year, but we undertook to include safety performance in bonuses and we did.” (So, if I have understood correctly, the life of a worker is worth 15% of the relevant executive’s bonus. I’ll just repeat that, in case I didn’t understand it correctly: the life of a worker is worth 15% of the relevant executive’s bonus. Which would mean that, should, for example, four workers die in any one financial year, eachlost human life would be worth 3.75% of the relevant executive’s bonus. I am open to correction here.)
Another shareholder said that the share price had come down below the flotation price. Why was this happening? Vedanta is suffering more than other companies. Despite financial problems, Vedanta had invested 42 million in community programmes. This was essential. But how did the company do it? Did it give money to other organisations or did it have its own foundations? How is the money monitored?
Anil Agarwal replied that the company’s Corporate Social Responsibility programme was very close to their heart. “We look after women and children around our operations,” he said. “Livelihood is very important and we want people around us to support us. We are a very healthy company. We made a healthy profit and we paid around four billion dollars in tax. Commodity process are down but we run zinc business very well, largest in the world. In India, only three companies produce oil. We are second largest producer of oil and gas. We always make a profit. This year we will make a decent profit. The share price is still two and a half times the listing price. We believe … if you look at other Indian resource companies… Rio Tinto produces iron ore in Australia; Vale produces in Brazil. They list in different places. We are an Indian company. This is very important to us. We are very transparent and we are very proud that we keep our value on the top of it. We are all committed to take this company forward.”
Another shareholder complained that every year there was “some pressure group outside or inside. Is this because some competitor is financing them?” he asked. “Human rights organisations should not come and take up investors’ time,” he asserted.
I found this intervention extraordinarily unpleasant. Shareholders at some AGMs express genuine concern at the human rights issues raised – and these concerns are not (though this was dealt with publicly later) being raised because anyone is being financed by the company’s competitors, but out of a sense of solidarity with fellow human beings suffering as a result of corporate operations. And as far as I know, none of us critics was being paid by anyone to be there!
Anil Agarwal replied that India has the largest deposit of bauxite in the world and only produces two million tonnes per year, while China produces more. India is running at 25% of capacity. It should provide its own resources. (I was not clear how this answer related to the mean-spirited question that had been asked, but he does have a tendency to go off on strange tangents from time to time.)
The next questioner said that the company gets a lot of negative press. There is also concern about the company’s ability to service its debt. He asked what the board proposed to do about press coverage and about debt? He said that the share price had dropped 80% in the last four years, much more than other mining companies. What steps would the board take in the next twelve months to protect share value?
Anil Agarwal replied with one of his favourite themes. “India has 1.2 billion people,” he said. He went on, “We only have import and import. We need to produce minerals in India. This is the first AGM where we are talking about share price. I am very pleased this question has been asked. We like these challenges. We have someone to deal with media. I am the original shareholder and I have not sold a single share. This is the company that will take our country on to a different level. Credibility of our new government, new Prime Minister, will make effort to take things forward. Things will change. You asking this question will help us to focus going forward. Each of our businesses will do better. Share price will do better. We will not leave anything unturned to make this the best company.”
Someone sitting in the body of the hall at the front, who I took to be the company’s Media Officer, added, “In India and Africa we have been working towards creating a new Vedanta brand. We are creating value and co-operation with the media. We reply to any questions that come. We are not hesitant to talk to media. This is the journey forward. Media will look at the organisation. It is a good start, transforming the brand.”
I should say at this point that acoustics in the lofty Ironmongers’ Hall are poor, and I was sitting right at the back, and there were interventions which I found a trifle difficult to hear clearly. It may be that I misheard what was said. But, as I understood it, we were being told that changing the colour of the company’s logo from orange and blue to green and blue was a good start to transforming the company’s image in the media. Never mind spillages, worker deaths, multiple law suits or any of the concerns being raised with such tenacity, year after year – we’ve got a new logo, and it’s got some green in it, so that’s alright, then. I will refrain from further comment.
There was some further discussion about share price, assets and bankers. My attention wandered. Then a shareholder as big-hearted as the one who had suggested that the company’s critics were being paid by its competitors (actually, it could have been the same man…) said crossly that shareholders should not be allowed to ask too much about human rights.
How splendid it is that the UK Government believes that, rather than loading companies with too many unwelcome regulations, it should encourage shareholders to exercise greater vigilance over the companies which they partly own! With shareholders like these, the market could then really rip! Just stop people from asking inconvenient questions about worker deaths, Indigenous Peoples’ rights or polluted water!
Samarendra Das, from Foil Vedanta, said that he wanted to repeat a few questions that the board had said it would answer last year about Goa. He said: “You were accused of taking too much iron ore. We understand that not all the Goa iron ore leases have been renewed. Can you tell us how much reserves and annual production has not been renewed so far?
“The Supreme Court judgement on Goa had ruled that all leases expired on 22nd November 2007, and any mining after that was illegal. Mining stopped on12th September 2012, implying nearly five years of illegal mining. The mining law in India provides for recovery of the full value of the mineral, plus 24% interest. What is the potential liability on this account? The lease renewals have been challenged. If the renewals are struck down, what is the potential additional liability?
“You’ve said there are 1.2 billion people in India. And you say that you have invested 60,000 crore rupees in aluminium projects. Did you think about what people in the area wanted? Because you have not conducted due diligence, that is why the company is in difficulty. You have not taken the consent of the people, and while you floated your IPO on the London Stock Exchange you lied to the press that you had secured the Lanjigarh deposits. There are conflicts in all the places you operate.”
Anil Agarwal kept interrupting.
Samarendra continued: “People in Goa are having their land destroyed by your operations. Beerulal Meshawal in Matoon has had to deal with the waste dumped on his land where he used to sow wheat and he is fighting for compensation. In Kanhei Pahad, Dangadeuli Dalits and Adivasis are fighting for their mountain. They do not need your compensation. Lodo, Dadhi, Bari, Haribandhu Kadraka, Raj Kishore and Lingaraj Azad are raising their concerns with one voice. Two thousand of them marched today in Muniguda. In Tuticorin, Rai Kishore is suffering from acid spillage. Rai Kishore has acid burns from Sterlite Tuticorin and is paying for his own treatment in the AVM private hospital. Why are all your victims invisible? All I hear is about share value, debt and profit. Do you really care? Many people marched against the company in Goa and elsewhere. Take their concerns seriously!”
Tom Albanese replied that the Indian Supreme Court ruling on mining in Goa was that the ‘deemed approvals’ by the Goan state government in 2008 were not acceptable. There needed to be an actual approval process. Since the last Vedanta AGM the Mumbai court had said that the state needs to deal with this and that the approvals could last till 2027. Vedanta had sent in applications and paid stamp duty payments so it had taken the action it needed to take, and state the government had not taken the action it needed to take. The state government has now taken active action to approve the deemed leases and extended them to 2027. The government reserves the right to re-auction them at that time. With these approved leases in place, Vedanta is going through an approval process which would enable it to mine from October, up to 5.5 million tonnes a year, which is within the court-imposed cap. Tom Albanese had been to Goa twice in the last two months and it was clear to him that the people of Goa were looking for jobs and looking forward to a resumption of mining, but in a more controlled way.
Samarendra said, “Please respond to what I asked about the victims. Not a word for them!”
Instead of any word of support for the victims, there was then a further interchange between various shareholders and board members about share price valuation and bonuses. Anil Agarwal said that it was very good that people were asking about the share price. He said that the simplification of the company should lead it to a better situation: costs would come down.
I suppose it is so much easier to deal with questions about money than these pesky, irritating questions about human rights and environmental destruction.
Simon Chambers moved on to this very matter, answering the question raised earlier by the shareholder who seemed to think Vedanta’s critics are all being paid by its competitors. Simon said: “We are not paid by competitors.” He explained that we raise questions at the AGM “because we are asked to do so by people in India and Africa who cannot come to the AGM to ask questions on their own behalf.” He then said that he wanted to come back to the question of the Korba disaster.
Anil Agarwal immediately interrupted him: “We are going through a difficult time,” he said, “and millions of people rely on us, and we are only running at half capacity. The accident has happened and we will do whatever we can do, but the matter is sub judice and we will do whatever we can. Ask your question!”
Simon replied that he was trying to ask it. “There are many people in Chhattisgarh who do not believe you have done whatever you can do,” he said. “You have suppressed the Bakshi report. Last year Mr Albanese said there were four other reports pending, but they are not reports, they are court cases against Vedanta, so it feels to me as if there has been a bit of a misrepresentation to the shareholders’ meeting. These are not reports but accusations against Balco, including against employees who are accused of culpable manslaughter. Have any verdicts been reached on these cases that Mr Kumar gave me details of earlier this year? You have spoken about being transparent and about dialogue. Are you aware of the new boundary wall in Korba as part of the project where the chimney fell down? It has gone up illegally and taken over 38 acres of farmland from local people without permission from local government or the state government. These things give Vedanta the reputation you are all fighting against. Is it that people on the board don’t realise what is going on on the ground and there is no chain of information, or is it that you do know and are pretending that you don’t?”
Tom Albanese said that there had been a 20% reduction in aluminium pricing (actually, he called it ‘aluminum’ pricing, but that’s okay…) so Balco needs to work very hard to stay viable. Vedanta needs to make sure it can survive. Chinese aluminium was being exported to India and undercutting Indian production. It is a struggle for business survival for Balco. It will have a huge effect on the community if the company does not get this right. The board wants to make sure the business can survive in whatever conditions the market throws at them. The land that Balco has acquired is the same land that was there at the original privatisation. There has been illegal land encroachment over that ten years. Vedanta did receive permission from the authorities for the expansion. Balco has been around for several decades and developed a huge legacy of relations between the business and the community.
Simon said he was not sure they were talking about the same wall. Tom Albanese asked him to send a map. Simon said the company was also dumping dry ash on what is known as common land. That is illegal, and there are industry standards about dumping it under water and producing dry ash ponds. Hard times in the industry are not an excuse.
Tom Albanese said that the government had laid down standards about fly ash. Vedanta has developed the capacity for dry ash to be used in concrete for road building. It is working on proper recycling of waste products.
Simon asked whether any verdicts had been reached on any of the four Balco cases? Tom Albanese said no.
A representative of Share Action asked a further question about occupational health and safety. She said she was pleased to see a fall in accidents from over 20 to eight, and congratulated the board on this even though, she said, it was far from acceptable. She repeated that the board had spoken about zero harm and said she was concerned about reports in the Observer and Reuters over the weekend about contamination of Zambian water supplies, and also about the protests outside the AGM. She noted that Vedanta had been ordered by the Zambian courts to pay fines over water pollution. How would the company manage the spiralling costs of legal action and how would the board answer the claim in the Observer that its policies are good on paper but not in practice? It was worrying if the board thinks that protest groups and human rights activists are being funded by competitors.
Tom Albanese pointed out that nobody on the board had said that. This was not the position of the board and the company. “Regarding fatalities,” he said, “we have said quite a bit about the steps we are taking. We respect cultural differences in different countries, we are strengthening contract management systems. We will not achieve the zero fatality aim this year. I cannot add anything more. In the Observer article regarding KCM, a claim was filed on Friday and we have not even received the claim, so I cannot comment, but we will review it and get back to the law firm about specific allegations.”
It was pointed out that the case was based on a report that Vedanta had itself commissioned – but there was no further response.
I then asked about the company’s Sustainability Report on page 36 of the Annual Report. This has a section on ‘highlights’ which notes that the company produced 40 million tonnes of CO2 equivalent in the past year as opposed to 37 million tonnes the year before. I said that I assumed that ‘highlights’ were aspects of the company’s record that it saw as good. In what way was an increase in carbon emissions good?
Tom Albanese explained that the increase in carbon emissions had been due to coal use in energy generation. He said that the company was committed to reporting on things whether they make it look good or bad.
I congratulated the board for the fact that, compared to all the other mining companies whose AGMs I attend, Vedanta is far ahead of all of them in making itself look bad.
That actually raised a bit of a laugh, which may have been a blessing in the context of such an utterly dire AGM. But it is of no comfort to the many people suffering as a result of Vedanta’s operations. The struggle must continue!